Inside The Stock Market ...trends, cross-currents, and outlook

Per our work, sectors like Consumer Discretionary and Technology provide a better way to capitalize on the global recovery now underway.

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It’s easy to see why equity investors are so down when looking at updates of the long term stock market performance. It’s even more depressing when long term equity returns are compared to bond returns.

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Don’t fear deflation. Leuthold historical studies show mild deflation can actually be a good environment for the stock market.

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The relationship between equity mutual fund cash flow and performance of the equity markets can be reduced to two basic “golden rules” of interpretation.

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Beware summer doldrums, August has a knack of sometimes being a crazy month. Market continues to be viewed as being in a severe correction mode, rather than a full fledged bear market.

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Major Trend Index has big decline in early July, bringing ratio all the way down to negative ground.

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A market decline much beyond 20% could be labeled a “non-economic” bear market. Outstanding feature of past “non-economic” bear markets has been their brevity.

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Economic indicators are hypersensitive to even small changes in the data, and investors are hypersensitive to the indicators themselves.

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Taxes are slated to go up as Bush tax cuts expire. History shows that selling increases in anticipation of higher capital gains taxes. Stock performance also does better in anticipation of lower tax environments than higher.

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Matt Paschke discusses how public pension funds are approaching huge hurdles as state and municipal governments have promised more than they are able to provide.

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Doug Ramsey looks at the history of “severe” market corrections (declines of 12% to 18%), and contrasts that with true bear markets.

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Despite our still (cautiously) bullish outlook, historical P/E levels which once provided support to the stock market are expected to now offer resistance as the market moves higher.

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Here Comes The Sun! Read about Dave Kurzman’s outlook for the solar energy industry.

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We examine the relative importance of country effect vs. sector effect within four regions: Europe, Eastern Europe/Middle East/Africa, Asia Pacific ex-Japan ex-China, and Americas ex-U.S.

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Focus of global investing has shifted from sector and is now centered on the regional effect.

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Analysts typically focus on demand for products and rarely look at the supply side. Consumer Discretionary companies were rewarded for their pessimistic positioning with better pricing and higher margins. 

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Global Industries equity portfolio has little to no exposure to the PIIGS (Portugal, Ireland, Italy, Greece, and Spain) as our Global Group Selection Scores have not led us to industries that have many component stocks domiciled in those countries.  However, if this work leads us to groups with heavier exposure to the PIIGS, we’ll buy them without blinking.

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When you are all doing the same thing at the same time, it’s usually a good time to question if the investment makes sense anymore.

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Stock market valuations no longer cheap, but they are also not yet truly expensive. Eric Bjorgen isolates several valuation measures to show just where they rank historically

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Helping propel the stock market recovery has been a build-up of excess liquidity. This has now generally been put to use, and can no longer be counted on as a market driver.

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